Writing Sample

Republic of South Africa Energy Portfolio Report

Introduction

The health of the economy and the maximization of social welfare of the people of the Republic of South Africa depends on an energy sector that values sources of energy that do not emit greenhouse gases while supporting high-tech industry employment. The energy issues that characterize the industry in the Republic of South Africa are influenced by the change in national politics when apartheid ended in 1994. Apartheid was plagued by segregation. Africans were limited in job resources in rural areas, this monopolized the energy market as their white counterparts dominated electrified city centers. Electricity was centralized to developing urban areas and therefore fostered an inefficient economy.

South Africa is now a constitutional democracy whose economy has since recovered, making South Africa one of the most developed nations in Sub-Saharan Africa. Eskom is the major electricity supplier, as it produces 95% of the nation’s total electric power usage, leaving just 5% of production for independent power producers (IPPs) (EIA, 2013). Although the monopolization of the energy market still exists, the amount of rural electrification has increased to 75% (Niez, 2010). This instigates economic growth, especially in urban areas. Such regions are already considered to be developed on a market perspective. Struggling, non-electrified rural areas are still considered to be developing, yielding this status for the nation as a whole.

Coal accounts for nearly 70% of the primary energy supply in the Republic of South Africa and its life cycle processes account for the majority of carbon dioxide emissions. Nearly 19% of the total primary energy supply comes from oil. Due the prevalence of coal and to a recent governmental moratorium on hydraulic fracturing in shale layers from 2011-2012, most oil is imported from members of OPEC and most natural gas is imported from Mozambique. The mining and coal and oil industries have enabled South Africa to become the 12th biggest carbon dioxide emitter in the world, according to 2010 estimates (EIA, 2013). Renewable energy projects and one nuclear generation station produce the remaining energy supply in South Africa. The monopolized energy market in South Africa has limitations but is becoming more competitive. Therefore the future energy portfolio should be aimed toward fostering a competitive renewable energy market among disadvantaged communities.

Country Context

Apartheid

The Republic of South Africa became a major mineral mining and export state toward the end of the nineteenth century. As a result, environmental degradation from mining has occurred. The government was dominated by Anglo-Boer white constituents who controlled most policy in favor of their prosperity. The social realm became characterized with European segregation by using laws, policies and taxes on native Africans that forced them out of land ownership and high-tech jobs into lower standards of living and manual labor employment. This employment type forced African and Indian ethnic groups into economic stress, sending black families and individuals to more affordable accommodations in rural areas.

The Anglo-Boer and South African ethnic groups fought in wars at the end of the nineteenth century and, as a result, responded with governmental action that fostered segregation. The National Party was created in 1914 and favored apartheid ideals and the 1948 general election gave the National Party rule in South African government. This further enforced and developed segregation laws in order to maintain dominance by European settlers.

The African National Congress, the opposition liberation party, won the general election in 1994, ending apartheid and regulated segregation. Until 1994, South African government was only interested in urban electrification. The newly elected government built a grid to electrify rural populations in order to end segregationist techniques in 1994 (Niez, 2010). The government has created policy and programs such as the Black Economic Empowerment (BEE) to end segregation as well. This program allows previously disadvantaged groups to access economic benefits such as employment preference and skill development. It allows previously disadvantaged groups easier access to conduct business in energy sectors.

Corruption

The Transparency International Corruption Perceptions index gives the Republic of South Africa an index of 4.3 in 2012. This ties South Africa with Brazil and Macedonia at a moderate number of 69 of 176 countries for the corruption index. This makes corruption a considerable factor when analyzing government, politics, economics and energy. There are two forms of prominent corruption in South Africa. The first is bribery, which is associated with professional relationships and interconnected business interests among political representatives and private businesses. This could be abused by outside energy importers that are not a part of Eskom. Secondly, the BEE program is often abused by companies who hire those individuals who benefit from the program as corporate board members without stockholder voting power. The employment of an individual who qualifies for the BEE program enables the company to qualify for governmental contracts in terms of reduced taxation or other regulation as per BEE.

Current Demographics

The population of South Africa is 48.6 million people (CIA, July, 2012 est.). Seventy-five percent of the population has access to electricity (Niez, 2010). Half of the population lives under the poverty line (CIA, 2000 est.) The youth of South Africa compose the majority of the population in the nation (Figure 1). This population is increasingly dependent on electrification and globalized education, especially as it becomes more accessible for disadvantaged citizens. Nearly 80% of the population in the country is of African descent, while only 10% are of Anglo-European descent. Asian, Middle Eastern and other ethnicities make up the remaining 10% of the population.

Current Energy Portfolio

Eskom

Eskom is the energy company that powers 95% of all of South Africa’s electricity needs and contributes the most electricity to the South African energy grid (Figure 2). The remaining 5% are owned by IPPs. This company was obtained in July 2002 from the private sector and is wholly operated by the South African government. The company also supplies electricity to 45% of the population of the entire African continent. This makes Eskom one of the top worldwide energy producers and distributors. Due to its prevalence in South Africa, this company is generally responsible for the construction of new transmissions lines, sub stations and generation stations.

Figure 2

Coal is the most prominently used form of energy in the Republic of South Africa. Sixty-five percent of all energy consumption in the nation is attributable to coal (Figure 3). This is due in part to the coal reserves that are found in South Africa, which has the world’s ninth largest recoverable coal reserves. This country holds 95% of the coal reserves for the African continent according to the U.S. Energy Information Administration (2013). The large coal reserve and mining industry allows South Africa to be the fifth largest coal exporter on the globe. The coal mining industry is culpable for using a majority of the energy supply and contributes most to greenhouse gas emission along with instate coal-burning for electricity. At least half of all coal mines in South Africa are open-pit mines. Air pollution from coal-fired power plants causes acid deposition and abandoned mining operations are common (Munnik, et. al., 2010).

The rest of the energy market in South Africa is characterized by gas and oil consumption at 11% and 10% of total energy consumption respectively (Figure 3). Finally, one nuclear generation station named Koeberg and renewable energies in the forms of solar, wind and hydropower compose remaining energy consumption. Plans to build more nuclear reactors are dismantled by lack of funding as the government sets aim toward using renewable sources. This demand is fueled by the developed parts of the country that require access to lighting, computers, communication and other technologies. The current energy demand in South Africa is not met by supply of electricity. Eskom has published a website that indicates current electricity demand and can warn citizens of high usage, influencing energy users to reduce their energy consumption.

The renewable energy resources in South Africa have not been adequately exploited, especially wind and solar (Figures 4 & 5). The South African government realizes this and therefore created the policy to integrate renewable energies into the energy policy plan. The South African Renewables Initiative (SARi) was established in 2011 in order to set a preference for using renewable energies in the future. The Renewable Energy Feed in Tariff was established in order to assist small renewable energy projects from biomass to solar, especially in rural areas. (Niekerk, 2010). National policy dictates that the country must produce at least 10,000 kWh of total electricity generation by the year 2013. In 2004, renewable energies generated 750 GWh of total electricity generation in South Africa according to the South African Department of Energy, 2013.

The country invests $3.6 billion for current and future projects to claim on renewable energies as of 2012. However, the Integrated Resource Plan released on March 25, 2013, authored by the South African Department of Energy, established plans for $52 billion renewable funding by the year 2020 (ESI-Africa.com, 2013). The plan cites the need to utilize renewable energy as a primary energy source to counter the electricity production of coal, oil and natural gas while meeting the demands of a growing country. Furthermore, rural communities are encouraged to create IPPs that specialize in renewable resource allocation.

Figure 5

The nation of South Africa emits 499 million tons of carbon dioxide every year (World Bank, 2009) (Table 1). This number is important because it is high for a developing nation. This increase in greenhouse-gas emissions is attributable to the energy intensive coal mining operations that have utilized the large coal reserves for exportation, energy generation and profit. Each South African citizen emits 10.27 tons of carbon dioxide into the atmosphere on a yearly basis (World Bank, 2009). Comparably, citizens from the United States emit 17.3 tons of carbon dioxide every year according to the (World Bank, 2009). The contrast here is quite large, but South Africa has a greater potential to switch to energy resources in non-greenhouse-gas-emitting power generation than U.S. interests do. This is because South Africa must develop more energy supplies to meet unsatisfied and increasing energy demand. The United States also has stronger political ties to oil, coal and natural gas than South African politics do.

The energy industry produces 78% of the country’s greenhouse gas emissions. (Mwakasonda et. al., 2009). Public electricity and heating, public transportation and iron and steel energy consumption contribute most to greenhouse gas emissions. Since South Africa is a developing nation, greenhouse gas emissions and energy demand are expected to increase. However, energy demands are already stressing and forcing the energy grid to expand. Current plans and governmental policies indicate that new energy projects and resources will be renewable. Demand increase allows new projects and power plant construction in the future. Renewable resource utilization will reduce carbon dioxide emission rates.

South Africa v. United States Energy Production and Consumption

The total energy production of the United States is 1966.0 MTOE per year and it is the number one energy producer in the world. This is compared to South Africa at 33.14 MTOE per year in total energy production. These two numbers vary significantly, yet South Africa is exporting coal and coal energy at one of the fastest paces in the world. The export of coal gives South Africa carbon dioxide emission rates that developing countries do not typically emit. The total energy consumption for the United States is 2,331.6 MTOE per year and it is number one in the world for energy consumption and total carbon dioxide emissions per person. South Africa is at 30.7 MTOE per year for energy consumption. The Republic of South Africa can barely keep up with energy needs of its own citizens. Therefore the country is clearly incapable of producing a total energy supply that could meet the needs of the U.S. market at this time (Table 2).

Table 2

South Africa statistics compared to the United States

Statistic

United States of America

The Republic of South Africa

Population

316,668,567

48,601,098

Energy Production (MTOE/yr)

1966.0

33.14

Energy Consumption (MTOE/yr)

2,331.6

30.7

GDP

$15.66 trillion

$578.6 billion

GDP per capita

$49,800

$11,300

Accessed April 29, 2013. Population and GDP found from the CIA World Fact book. Energy values found from the U.S. Energy Information Administration.

Potential Energy Supply

The national electricity and utility supply company Eskom, generated 44,145 MW of electricity during 2012. It is estimated that the electricity supply will have to double by the year 2025 in order to meet the energy demands of the developing nation. The current energy portfolio utilizes coal as its main resource of electrification. This supports environmentally degrading mining activities. The coal industry contributes the most to greenhouse-gas emissions. Therefore renewable energies are being sought after for economic and political reasons.

The Republic of South Africa has access to solar radiation, wind currents, hydroelectric power, biomass, geothermal and wave energies (Figures 4 & 5). All of these energy resources are being considered for further development. The nation also projects that, by 2030, renewable energies will compose over 40% of total energy production (Renewables, 2012). By 2050, it is estimated that solar will compose 14% of South Africa’s total energy supply as South Africa has great solar resources. This power source could generate up to 548 GW as estimated potential. In addition to solar, wind energy is already being exploited in projects across the country. The wind energy potential is 14.6 GW of electricity for the future; most wind resources in South Africa are moderate or abundant, especially along the coasts.

The Republic of South Africa could invest all of its time, money and future in the further development and use of coal as a primary resource contender. This preference would lead to severe acid deposition and an increase in greenhouse gas emissions. The result would produce on negative effects on public health and would significantly cost the country in pollution abatement. While the coal industry maintains prominence in South African energy and politics, the country is making efforts to fund renewable projects into the future. Energy efficiency is also a potential resource of energy. Eskom is constructing more transmission lines and sub-stations that allocate electricity more effectively. The Energy Efficiency Strategy adopted by South Africa sets objectives to reduce energy inefficiency by 12% from 2005 to 2015.

Policies Governing Energy Resources in the Country

Kyoto

The Republic of South Africa is a signatory to the Kyoto Protocol and are making efforts to reduce greenhouse gas emissions. This is idealistic in the context of South Africa. The country is still developing and will require double the energy generation in the next twenty years. South Africa must exercise a strong will toward selecting renewable energy resources for its future demand in order to achieve key guidelines in the international protocol. The energy state of a developing country does not produce the correct conditions to achieve international policy guidelines regarding greenhouse gas emissions at this time. Future development of renewable energies is currently underway as a carbon mitigation strategy.

Energy Regulators

The primary energy regulators in the South African energy environment are the SA Department of Energy and the National Energy Regulator of South Africa (NERSA). The National Energy Regulator of South Africa is the official governmental agency that is in charge of regulating industry and implementing the nation’s energy plan. South Africa is focusing on diversifying sources of energy to include investments in renewable energies. The agency is responsible for expanding rural electrification grids as well as securing energy resources. The agency subsequently regulates energy markets and prices in order to promote competition within the energy sector. NERSA was founded in 2004 in order to help regulate the electricity market as well as the oil and natural gas industries. In 2011, NERSA began a moratorium on shale hydraulic fracturing due to environmental concerns over the process. This ban was lifted in September of 2012 as the need for more electricity development becomes paramount in the developing economy and many companies have filed for permits. The Nuclear Regulator (NNR) was established in 1999 and oversees the regulations that impact the Koeberg nuclear generation station as well as any potential sources of nuclear energy.

Five Key National Policies

The sustainable development of a secure and diversified energy market, as well as the need to reduce pollution and carbon emissions motivate the South African government to produce renewable energy policies (Niekerk, 2010). The White Paper on Energy Policy of the Republic of South Africa of 1998 has shaped the general demand and supply of energy within the nation. It expired in 2010 but was important in developing the current energy market. The policy cites the need to convert to the use of renewable energies, but did not list specific objectives or deadlines for any energy production. This was made permanent policy by the 2009 Energy Act discussed below. Second, the White Paper on Renewable Energy of 2003 lays the groundwork for ensuring that renewable energy has a place in the South African energy sector. The policy sets the objective to achieve 10,000 GW of electricity production from renewable energies by 2013. Third, the Energy Efficiency Strategy of the Republic of South Africa of 2005 (revised in 2008) sets a target for energy efficiency within the means of production and consumption. The target is 12% reduction of energy inefficiency by the year 2015 (Edkins, et. al., 2010).

Fourth, the National Cleaner Production Strategy of 2004 outlines the ways that South Africa will achieve its goals and public demands for energy while maintaining practices of sustainable consumption. Finally, the 2009 Energy Act is designed to plan for the energy needs and resources of the future. The goal of this legislation is to increase energy production to allow more affordable access to electricity, especially among impoverished regions. It cites renewable energy development as a key economic booster. These policies have been effective in developing rural electrification while supporting a more diversified energy sector (Edkins, et. al., 2010).

Proposed Portfolio Based on Potential Supply and Demand

The Republic of South Africa should take further steps to abate their greenhouse gas emissions though a comprehensive energy and environmental policy. The policy should address the environmental damage caused by the coal mining and energy production industry. This would ensure a more regulatory environment that could be applied in similar form to natural gas and oil production, especially as it applies to hydraulic fracturing. These markets must be properly regulated and taxed before serious carbon reduction strategies can be funded and implemented.

The future of energy production and consumption must be reliant on renewable resources. These types of energy production produce a fraction of the amount of greenhouse gases that the coal industry emits. Solar, wind, geothermal, hydroelectric, and wave generation are and will continue to be major projects in the South African energy sector (Edkins, et. al. 2010). The renewable energy field should be well-funded through proper coal, oil and natural gas extraction taxation.

Conclusion

The Republic of South Africa has a duty to the environment and to its people to be a clean energy provider. The government must be relied on in this sector since it owns 95% of electricity generation within the South African energy grid. The coal industry takes the main stage on energy and overall economic generation since mining is a large market within the country. The focus is on renewable energy to reduce atmospheric pollution, greenhouse gases and carbon emissions. The country is still developing, but it has the opportunity to develop in such a way that fosters sustainability and energy efficiency through renewable resources as the core of the South African energy sector.

Nevada Proud

+ John Steinbeck Once Said

“In every bit of honest writing in the world there is a base there. Try to understand man, if you understand each other, you will be kind to each other. Knowing a man well never leads to hate and almost always leads to love.”